At AHG, we pride ourselves on being climate wonks. Some of us also pride ourselves on being fashionable climate wonks. But recently, we’ve been wondering if that’s an oxymoron.

The fashion industry’s emissions are notoriously difficult to pin down. Most estimates put them around a whopping 5% of annual global greenhouse gas (GHG) emissions. Roughly 40% of those emissions stem from extracting raw materials and then processing them into yarn.

From a climate perspective, every common textile is problematic. Polyester requires oil extraction, cotton requires carbon-intensive fertilizer, and cellulosics (e.g., viscose, lyocell) rely on deforestation and GHG-emitting chemicals.

And while consumers are increasingly interested in buying sustainable clothing, we don’t have the tools to ensure our purchases result in emissions reductions, nor do we trust brands’ sustainability claims. Luckily, this is the kind of problem innovation can solve, with an assist from policy.

Pulling back the curtain

Only half of fashion companies are tracking and disclosing aspects of their emissions, according to S&P. And why would they? It’s time-consuming, expensive, and they aren’t being held to any sort of standard.

French regulators have taken a first step toward requiring clothing companies to be more transparent about their emissions. Big brands will now be required to include “climate impact labels” with their garments. If they don’t comply, they’ll face a modest fine.

Transparency is essential, but ultimately insufficient. Even if brands had to disclose their emissions, they don’t have access to the low-cost, low-carbon materials needed to reduce their climate impact and keep prices down. Other industries, like automobiles, have shown the importance of both mandatory standards and technological advancements to transform an industry.

That’s why forward-looking startups and policymakers are stepping in.

Changing the game by changing the fabric

A new wave of startups have arrived on the scene to reduce textiles’ carbon footprint in two ways:

Textile-to-textile recycling: Circ, Recover Fiber, and others are working to take discarded textiles, like your old cotton-blend T-shirt, to make yarns for new textiles.

New, low-carbon textiles: Rubi Labs, Mango Materials, and others are creating carbon-negative or near-negative textile substitutes (no raw material extraction required!)

The ability to get to cost parity at scale with traditional textiles will be key to spurring widespread adoption of these new textiles. For a limited time around Earth Day this year, Zara and Lululemon sold clothes made with Circ’s recycled materials for $70-80 – not exactly cheap for a pair of pants or a T-shirt.

Some brands have begun to partner with and invest in these startups, which could lead to more sustainable products in the medium-term. Outdoor retailer Patagonia used its VC arm, Tin Shed Ventures, to invest in Rubi. The shoe company Allbirds partnered with Mango Materials to create a net-zero carbon shoe, available in Spring 2024.

Moving beyond the good intentions of a few companies, and getting these innovative materials to a competitive price, requires policy intervention.

There’s a (better) policy for that!

Policymakers in the US and Europe are starting to explore how emissions reporting and reduction mandates could help clean up the fashion industry.

The European Commission plans to have comprehensive rules in place by 2028 to make the fashion industry more sustainable. For instance, the EcoDesign Regulation would create binding emissions requirements for textiles and introduce digital product passports to give consumers garment-specific sustainability data. A big question mark is whether the fines for non-compliant companies will be significant enough, a decision left to individual member states.

In the US, states are taking the lead. New York’s proposed Fashion Act would require large retailers to map their supply chains, set and pursue emissions reduction targets, and face meaningful penalties (up to 2% of annual revenues) for non-compliance. The bill’s supporters, which include prominent environmental groups and mission-driven brands, believe it could revolutionize the fashion industry the same way California’s fuel efficiency standards have revolutionized the auto industry.

While companies like Eileen Fisher and Patagonia have endorsed the bill, the American Apparel & Footwear Association, an industry trade group, has expressed concerns about implementing the patchwork of regulations springing up across the globe.

We’ll take it all

Challenges aside, the best outcome for the planet would be both the EU and New York passing emissions reduction targets and imposing meaningful penalties. But an effective new policy in even one major market could have a significant impact around the globe. If we look again at the auto industry, multinational manufacturers now have to plan for the most stringent market and scale up EV production accordingly.

A requirement to reduce textile emissions in a major market would also drive investment in startups like Circ and Rubi. That, in turn, will help them scale and advance down the cost curve, resulting in efficient recycling processes and more cost-effective, carbon-negative textiles.

The fashion industry’s climate glow-up won’t be easy, but as Tim Gunn would say, we’ve got to make it work.